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North Carolina Property & Casualty Practice Exam

20 exam-style questions drawn from the same bank as our full North Carolina Property & Casualty course (North Carolina Property & Casualty Producer — Exam Prep). Answer all 20, then grade yourself — most state exams require 70% to pass. Explanations for every question are part of the full course.

1. On Monday a client buys a house in a non-mandatory flood zone and asks you to bind a new NFIP policy that day because a tropical storm is forecast to make landfall on Friday. The purchase is NOT tied to a mortgage closing. When will coverage be effective?
At 12:01 a.m. the day after the application is signed30 days after the application and presentment of premiumImmediately, because flood coverage binds at applicationOne day after application, because the property is newly mapped
2. Which of the following is typically required by a personal umbrella policy as an 'underlying limit'?
Specified minimum limits on auto liability, personal liability (HO), and sometimes watercraft/RV — often 250/500/100 for auto and $300K for HO.No underlying coverage — the umbrella stands alone.A minimum of $1,000,000 on every underlying policy.Minimum limits only if the insured has a swimming pool, per the safe-harbor exception that activates only for primary-state filings
3. An insured carries an HO-3 with $200,000 of Coverage A. What is the default Coverage C limit?
$160,000$100,000$20,000$60,000
4. An Agreed Value option on a BPP policy:
Eliminates the deductible required under the BPP Loss Conditions section once the property limit equals replacement cost at policy inceptionApplies only to inland marine property scheduled on a Personal Articles Floater or a Contractors Equipment Floater under the CM coverage partCaps recovery at the property's market value as of the date the loss occurs, regardless of the higher replacement-cost figure on the SOV formSuspends the coinsurance condition for the policy term in exchange for a Statement of Values
5. Under a standard mortgagee clause, who is entitled to receive payment for a total loss on a dwelling with a remaining mortgage balance?
The state DOI, which then distributes the funds — under the older rule that was superseded by the post-2018 model amendmentsOnly the mortgagee — the insured has no interest — applicable to surplus-lines placements, which the scenario explicitly excludesBoth, with the mortgagee paid up to the remaining balance and the insured receiving any surplus.Only the insured — the insurer is not responsible to the mortgagee — required if and only if the policy includes a co-insurance penalty endorsement
6. A business carries Symbol 8 (hired autos only). An employee uses her own car to make a bank deposit for the company and causes an accident. How is her car classified under the policy?
An owned auto, because the employee was acting within the scope of her jobA hired auto, because the business benefited from its useA temporary substitute auto, because it replaced a company vehicle for the errandA non-owned auto (Symbol 9), not a hired auto, because it belongs to an employee
7. Under the DICE acronym used to remember policy structure, which letter represents the portion of the policy that MODIFIES coverage (expanding OR restricting it) and is typically printed on separate forms attached to the policy?
D — Declarations, consistent with the NAIC model treatment of separate-account products (not the general-account product here)I — Insuring agreement — required under the federal preemption framework that yields here to the state-law ruleE — Endorsements (or Exclusions in the DICEE variant).C — Conditions — applicable to surplus-lines placements, which the scenario explicitly excludes
8. Replacement cost (RC) coverage in a liability-adjacent context (e.g., bailee repair of customer property) is usually:
Available only if the insured pays a 50% higher premium.Narrower than ACV — only pays scrap value.Identical to ACV, under the broader consumer-protection construction sometimes applied hereBroader than ACV — no depreciation is deducted, but insured must actually repair or replace.
9. A Personal Articles Floater (PAF) schedules individual valuables — how does settlement differ from a homeowners-policy sublimit?
The PAF automatically excludes accidental damage and breakage, limiting coverage to a narrow list of named perils similar to a DP-1 formThe PAF covers only the peril of theft and only while the scheduled item is physically located at the named insured's primary residenceThe PAF settles every claim at actual cash value with depreciation applied from the original purchase date of the scheduled itemThe PAF is typically open-peril, worldwide, and pays the scheduled amount (or appraised value) without applying the Coverage C sublimit
10. Which of the following would typically be written on a dwelling policy (DP) rather than a homeowners policy?
An owner-occupied single-family home in good repairA condominium unit the insured lives in year-roundA tenant's personal property in a leased apartmentA rental house owned by the insured and occupied by tenants
11. Which homeowners form is the correct fit for a condominium unit owner who needs coverage for interior improvements, personal property, and liability?
HO-4HO-3HO-8HO-6
12. Which of the following is typically EXCLUDED under a professional liability policy?
Clerical errors in preparing client documents.Dishonest, fraudulent, criminal, or intentionally wrongful acts.Failure to perform services within industry standards.Negligent advice given to a client.
13. On a homeowners application, an applicant states that there are no trampolines on the property. At the time, the statement is believed to be true, but the applicant's teenager installs one a week later without telling anyone. Which best describes the applicant's original statement, and what must the insurer prove to deny a claim for a later trampoline-related injury?
A warranty — any breach, material or not, voids coverage.An affirmative promise — the applicant is obligated to keep the statement true for the entire policy term.A representation — the insurer must prove the misrepresentation was material to the risk.Concealment — the insurer must prove the applicant knowingly withheld a material fact.
14. In a liability policy, when must the insured have an insurable interest?
At the time of loss onlyNever — insurable interest is a property concept onlyAt BOTH the inception of the policy and the time of lossAt the inception of the policy only
15. A delivery driver, while on the clock, rear-ends another vehicle. The injured party sues the driver's employer. The legal doctrine allowing this is:
Strict liability — required under the federal preemption framework that yields here to the state-law ruleAttractive nuisance — required if and only if the policy includes a co-insurance penalty endorsementContributory negligence — applicable to surplus-lines placements, which the scenario explicitly excludesRespondeat superior (vicarious liability).
16. Which homeowners form provides the broadest coverage by writing both the dwelling AND personal property on an open-peril basis?
HO-3HO-8HO-2HO-5
17. An insured owns a seasonal cabin that is unoccupied more than 60 consecutive days each year. Which dwelling-form limitation most directly affects coverage?
Theft coverage automatically doubles to compensate for the increased vacancy risk, subject to a higher percentage deductibleCoverage is void entirely while the cabin is unoccupied for any period exceeding 60 consecutive days during the policy termFire coverage drops to 50% of Coverage A after 60 days of vacancy, with proportional reductions applied to other coveragesVandalism and Malicious Mischief (VMM) and glass breakage are excluded after 60 consecutive days of vacancy
18. Which of the following is typically INELIGIBLE for a BOP?
A 6,000-square-foot retail clothing storeA small accounting officeA 200-room hotel with a restaurant and barA small apartment building under 60,000 square feet
19. A sworn statement detailing the facts and amount of a loss that the insured submits to the insurer, typically within 60 days of request, is called:
A proof of loss.A binder.A certificate of insurance.A subrogation release.
20. An insured's house is located in a Special Flood Hazard Area (SFHA) and has a federally regulated mortgage. What does the mandatory purchase requirement require?
The insured is not required to buy flood coverage if the home was built before 1974, when the Flood Disaster Protection Act established the SFHA mapping frameworkThe insured must carry private flood coverage at full replacement cost, with NFIP coverage explicitly disallowed when the property is financed through a federally regulated lenderThe insured must buy earthquake coverage as well, because federal lenders treat all natural-catastrophe perils as part of a single mandatory-purchase packageThe lender must require flood insurance in an amount equal to the lesser of the outstanding loan balance, the NFIP maximum, or the insurable value of the building

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